Analysts: Rupee Heading to 70

Indian rupee banknotes are stacked at a branch of the HDFC Bank Ltd. in Mumbai, Thursday.

The Indian rupee’s slump may not be over.

The currency hit record lows for five straight trading sessions, bottoming out at 65.56 for one U.S. dollar Thursday before recovering to 63.80 Friday afternoon.

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Deutsche Bank AG said in a research note earlier this week that the rupee could fall to 70 to the dollar in a month, and Macquarie analyst Nizam Idris told television channel ET Now that he sees the currency in the range of 67-70.

Care Ratings said it expects volatility in the rupee to continue, while Dariusz Kowalczyk, a currency strategist at French bank Crédit Agricole CIB, said downside risks on the currency will prevail. “Steps to convincingly address the fundamental weaknesses have not been taken and are unlikely ahead of the 2014 elections,” he said in a note.

These downside risks include the India’s slowing economy and its large current account deficit, a reflection of the fact India imports more than it exports. India’s current account deficit for the year through March was $88 billion.

Mr. Kowalczyk said the rupee could recover if foreign investors put money back in the country and other emerging markets.

But that may not happen in the near term.

Global investors have been withdrawing from emerging markets since May, when the U.S. Federal Reserve hinted that it would start reducing its bond-buying program.

The rupee fell 4.5% in five trading sessions through Thursday. The falling currency stokes concerns about India’s economic growth, which could result in more withdrawals from India, analysts say.

But not everyone is downbeat on the rupee. Kanika Pasricha, an economist at Mumbai-based ICICI Bank Ltd., expects it to trade between 59 and 60 in the near term following interventions by the central bank.

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